This pap er examines three broad issues (i) exisating foo dgraims market mechanism, (ii) price trends and terms of trade in foodgrains and (iii) government interventions in foodgrains marketing mechanism along with distortions and possible remedies. The results revealed that the restrictive policies in agriculture andrelatively liberalpolicies innon-agriculturalpric es have risen at a faster rate, turning the terms of trade against agriculture. The study suggests that to provide impetus to agriculture, the sectoral terms of trade should bemaintained; pro curementprices offoodgrains should be raised every year in consonance with general price level. The government must ensure zone-free trading of foo dgrains onp arwith the industrial goods. The public distribution system of foodgrains needs to be revamped and made efficient, accountable and cost effective. The new concept of ceiling/ maximum sale price shouldbe intro ducedkeep ing inviewthe marketing costs andreasonable profits/margins oftraders and the ruling/consumerspric e be allowed to operate in between procurement price and ceiling price.